Two Sided Efficiency

To be of value to our customers, meaning that we provide a product or service at a price that is competitive and of use, we have to be efficient in the creation and delivery of that product. If we aren’t, we won’t be able to provide the product at a price that is acceptable to the customer and profitable to us.

This is first order efficiency.

The second order is how efficiently can the customer work with us. How easy is it for them to acquire, use, service, share with their friends, etc. We can provide a great product and at a great price but if it is difficult to acquire, hard to setup, impossible to service, and has no network effects, we greatly impede the return on our first order efficiencies. Second order efficiencies are harder to spot, diagnose and correct, they are usually felt by the customer, not us, and as such we have to constantly researching, asking, pretending to be the customer, or whatever it takes to make sure we feel deeply what their pain points are. Not ours, theirs.

That is second order efficiency.

In the situations I encounter a provider usually has one side of the efficiency equation working, typically first order, better than the other, unless of course you are government, who has completely forgotten why they are doing what they are doing and who they serve. But that is another story. In rare situations, double unicorns, both sides work perfectly.